More and more companies are requesting their suppliers to integrate their business systems and share information online and in real time. Integrated business systems enable sourcing companies to plan and execute their supply schedules within minutes and receive confirmation almost immediately. Integrated systems effectively reduce the cost of purchasing, which may range from $30 to $170 (USD) per order, down to a few cents. In addition, they almost completely eliminate the need for expeditors and they improve compliance with shop floor schedules, resulting in better customer service. An added benefit of integrated systems is their performance tracking capability and its associated improvement in supplier relationships.
Supplier Relationship Strategies
Developments in information technology (IT) have required and enabled manufacturing companies to rethink and restructure their supply chain strategies. For example, customer focus strategies have led to the development of customer relationship management (CRM) tools, and back-office support strategies have helped develop enterprise resource planning (ERP). Other examples of integrated applications include electronic data interchange (EDI); manufacturing execution system (MES); computer aided design/computer aided manufacturing (CAD/CAM); Just-in-Time (JIT); vendor managed inventory (VMI); and warehouse management system (WMS). Finally, integrating suppliers' information systems beyond the EDI type connection has been necessary to shape this evolution into a more refined integration and relationship. Supply chain management (SCM) requires an outward view of company operations that extends to suppliers, customers, distributors, and beyond, as well as an understanding of the value of the contribution made by each element in the supply chain. A simple supply chain system includes three main elements: suppliers, a company, and customers,
Complex supply chain models evolved from this simple model, with developments in management and technology adding components across the supply chain.
Many companies have come to realize that although the ultimate goal of making profit remains the same, relationships with suppliers are completely different from relationships with customers.
Supplier relationship management (SRM) includes information integration with respect to numerous areas: delivery schedules; inventory; capacity; commitment to schedules; delivery information; delivery; quality and financial performance of suppliers; quotation management or request for quotation (RFQ); credits; adjustment; and other related information in addition to its real-time tracking and monitoring.
Unlike CRM, an SRM relationship generally evolves with each supplier over time based on the significance of the sourcing. An illustration of this relationship is shown in figures 2 and 3. SRM may place key suppliers at higher levels of integration, and perhaps even at strategic alliance levels, while keeping some suppliers at the procurement relationship level.
At its basic level, a purchasing transaction involves buying a product or service from a seller one time only and without any expectation of a repeat transaction. Buying items from a department store or gas at a gas station are examples of this type of transaction. The next level is where an expectation of repeat transactions and a resultant business relationship starts. The vendor is recorded in the buyer's database, the buyer is checked for credit worthiness, and a purchase order (PO) or invoice may be issued for the transaction. Thereafter, the relationship becomes more complex, with the vendor and the buyer entering into binding, long-term contracts and agreements and joint deployments of business processes.
Strategic drivers for SRM may include, but are not limited to, all of the following:
* Consolidation of suppliers where better supplier capabilities are favored
* Expansion into global markets
* Pressure on price and profit from customers and competition
* Pressure on value generation in supply chain
* Performance requirements of shareholders
Changes in globalization and economic developments and significant improvements in quality, price, and delivery have directed many companies to shift their focus on suppliers that are located in other parts of the country and the world. In many cases, this has helped sourcing companies to develop new markets while sourcing from the same area. At the same time, however, increased global competition has placed enormous pressure on price and profit for products and services, as evidenced by global trade. Most companies are now faced with the challenge of sourcing and delivering the same products and services more quickly and at a lower cost. Coupled with the developments in IT and information management, some of these challenges are met by integrating the suppliers' information systems with customers' information systems, with improved visibility and timely decision support, while at the same time applying lean principles in order to improve their competitiveness.
In these days of rapid change, deciding the level of relationship to develop with each supplier has become increasingly important. Depending on the structure of the supply chain, strategic drivers, strategic priorities, and operational objectives, a relationship with each supplier must be established. The level and the type of relationship (buy and sell, contractual, strategic alliance, etc.) must also be decided. For example, some current strategic supply chain alliances may include third- or fourth-party logistics, service and warranty management, exclusive distribution networks, etc. All of these can be controlled and managed by SRM.
Supplier Relationship Strategies
Developments in information technology (IT) have required and enabled manufacturing companies to rethink and restructure their supply chain strategies. For example, customer focus strategies have led to the development of customer relationship management (CRM) tools, and back-office support strategies have helped develop enterprise resource planning (ERP). Other examples of integrated applications include electronic data interchange (EDI); manufacturing execution system (MES); computer aided design/computer aided manufacturing (CAD/CAM); Just-in-Time (JIT); vendor managed inventory (VMI); and warehouse management system (WMS). Finally, integrating suppliers' information systems beyond the EDI type connection has been necessary to shape this evolution into a more refined integration and relationship. Supply chain management (SCM) requires an outward view of company operations that extends to suppliers, customers, distributors, and beyond, as well as an understanding of the value of the contribution made by each element in the supply chain. A simple supply chain system includes three main elements: suppliers, a company, and customers,
Complex supply chain models evolved from this simple model, with developments in management and technology adding components across the supply chain.
Many companies have come to realize that although the ultimate goal of making profit remains the same, relationships with suppliers are completely different from relationships with customers.
Supplier relationship management (SRM) includes information integration with respect to numerous areas: delivery schedules; inventory; capacity; commitment to schedules; delivery information; delivery; quality and financial performance of suppliers; quotation management or request for quotation (RFQ); credits; adjustment; and other related information in addition to its real-time tracking and monitoring.
Unlike CRM, an SRM relationship generally evolves with each supplier over time based on the significance of the sourcing. An illustration of this relationship is shown in figures 2 and 3. SRM may place key suppliers at higher levels of integration, and perhaps even at strategic alliance levels, while keeping some suppliers at the procurement relationship level.
At its basic level, a purchasing transaction involves buying a product or service from a seller one time only and without any expectation of a repeat transaction. Buying items from a department store or gas at a gas station are examples of this type of transaction. The next level is where an expectation of repeat transactions and a resultant business relationship starts. The vendor is recorded in the buyer's database, the buyer is checked for credit worthiness, and a purchase order (PO) or invoice may be issued for the transaction. Thereafter, the relationship becomes more complex, with the vendor and the buyer entering into binding, long-term contracts and agreements and joint deployments of business processes.
Strategic drivers for SRM may include, but are not limited to, all of the following:
* Consolidation of suppliers where better supplier capabilities are favored
* Expansion into global markets
* Pressure on price and profit from customers and competition
* Pressure on value generation in supply chain
* Performance requirements of shareholders
Changes in globalization and economic developments and significant improvements in quality, price, and delivery have directed many companies to shift their focus on suppliers that are located in other parts of the country and the world. In many cases, this has helped sourcing companies to develop new markets while sourcing from the same area. At the same time, however, increased global competition has placed enormous pressure on price and profit for products and services, as evidenced by global trade. Most companies are now faced with the challenge of sourcing and delivering the same products and services more quickly and at a lower cost. Coupled with the developments in IT and information management, some of these challenges are met by integrating the suppliers' information systems with customers' information systems, with improved visibility and timely decision support, while at the same time applying lean principles in order to improve their competitiveness.
In these days of rapid change, deciding the level of relationship to develop with each supplier has become increasingly important. Depending on the structure of the supply chain, strategic drivers, strategic priorities, and operational objectives, a relationship with each supplier must be established. The level and the type of relationship (buy and sell, contractual, strategic alliance, etc.) must also be decided. For example, some current strategic supply chain alliances may include third- or fourth-party logistics, service and warranty management, exclusive distribution networks, etc. All of these can be controlled and managed by SRM.
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