| Managing supplier relationships used to be a zero sum | | | | information is on the increase. Companies are |
| game. Most companies focused on short terms goals | | | | investing significant resources in managing suppliers |
| where price was the main focus. Bullying suppliers | | | | and the use of supplier relationship software is |
| were commonplace in some organizations. Employees | | | | becoming more common place. Supply chain |
| took great pride in "facing down suppliers" and | | | | managers are increasingly using the web to |
| relationships were viewed on "how much money we | | | | collaborate and to communicate with supply chain |
| will make". However, with the increase in outsourcing | | | | partners. |
| and volatility in commodities, supplier relationship | | | | Find the right partners |
| management (SRM) has moved to the forefront of | | | | Previously, partner selection only focused on price, |
| organizational strategy. Companies are spending | | | | with value sometimes taking a backseat. Today, |
| increased time on their selection criteria and | | | | companies are spending increased time and resources |
| determining clear best practices to manage partner | | | | to develop and implement a comprehensive supplier |
| relationships. However, few companies have | | | | qualification process. Companies need to establish a |
| mastered supplier management and SRM is in its | | | | strategic road map and clear selection criteria. For |
| infancy. | | | | example, the selection criteria may include important |
| The question of quality | | | | components such as strategic vision, capability, |
| With the increase in outsourcing and the growth in | | | | capacity and environmental issues. Companies need |
| world trade, product quality is increasingly an | | | | to evaluate if potential suppliers meet their required |
| important factor. Many companies in the pet food, | | | | standards. Furthermore, supplier selection is not just |
| toy and dairy industry are still reeling from recent | | | | limited to procurement departments, and companies |
| quality scandals in China and other parts of Asia. | | | | are increasingly making use of cross functional teams. |
| These scandals have put increased pressure on | | | | Employing external agencies to monitor and track |
| companies, as consumers are progressively more | | | | supplier relationships is also on the increase. |
| concerned about product quality. These quality | | | | Building relationships |
| scandals of late, as well of those in the apparel | | | | Companies must always act with the relationship in |
| industry over the past decade, have highlighted the | | | | mind. Companies must have a clear relationship |
| importance of managing relationships and the | | | | development plan for each partner with clear goals. |
| importance of supplier tracking and auditing. The days | | | | Building trust is key in any relationship, and trust must |
| where companies could plead "we don't have control | | | | be built at all levels of the organization, and not just |
| over our suppliers" are gone. Environmental concerns | | | | at senior management level. For example, companies |
| and an increased scrutiny of labour practices also are | | | | can introduce department induction programs and in |
| demanding improved supplier relationships. | | | | some cases even embed suppliers in the organization. |
| Outsourcing to the "unknown" | | | | The more partners understand each others |
| With outsourcing to Asian countries on the increase, | | | | businesses, the better for all parties involved. With |
| companies need to understand culture issues. Many | | | | clear communication channels, partners will have the |
| companies have been burned when outsourcing | | | | confidence to address problems head on. |
| manufacturing to countries such as India and China. | | | | Advantages of relationships |
| Management practices that worked in one country | | | | One of the key advantages of long term |
| are not necessarily going to work in another country | | | | relationships is cost reduction. Companies work |
| and companies need to change the way they think | | | | together to solve supply chain problems and learn |
| and work in other markets. Country values are also | | | | from one another. Better collaboration and |
| different. For example, cutting legal corners is seen as | | | | communication will lead to increased sales. Improved |
| a survival technique and is much more tolerated in | | | | collaboration can also lead to better demand planning |
| some countries. It is important to understand the | | | | and route scheduling. For example, when Kellogg |
| value system of each country and it is important to | | | | evaluated Tesco's inventory levels it realized that |
| assume nothing. | | | | most out of the stocks occurred in the middle of the |
| Outsourcing to emerging markets provides companies | | | | week. Kellogg worked with Tesco and changed its |
| with unique challenges. Companies must develop | | | | delivering schedule to accommodate the retailer. By |
| contingency plans as delivery delays are normally | | | | changing the delivery scheduled, Kellogg reduced |
| more frequent. As one executive put it, "getting on | | | | stock outs, increased sales and improved both |
| time deliveries from our Asian suppliers, is one of our | | | | customer and consumer satisfaction. As the Kellogg |
| key challenges." Working in the "unknown" also | | | | example demonstrates, working with suppliers can |
| provides companies with unique legal challenges. | | | | provide mutual benefits to all parties involved. |
| Foreign companies trading in China and India have | | | | In today's world, companies require suppliers that are |
| complained in the past about unfair legal practices. | | | | results orientated and are demanding increased speed |
| Companies must avoid disputes and ensure contracts | | | | from suppliers. Not all suppliers are equal and all |
| are clear to all parties involved. Do not assume all | | | | suppliers need to be segmented. Segmentation is |
| parties will read the fine print and try to avoid legal | | | | critical, as it will determine the importance of the |
| terms. Always aim to simplify matters for suppliers. | | | | partnership and how much time companies need to |
| Consult lawyers that not only understand local laws | | | | spend on building supplier relationships. All members of |
| but also cultural issues. The interpretation of the law | | | | the supply chain must have clear accountability and |
| can differ from country to country and cultural issues | | | | each member of the team must be aware of his or |
| need to be taken into consideration. | | | | her duties. Companies need to monitor compliance |
| Technology | | | | and implement and communicate clear Key |
| In recent years, companies have seen technological | | | | Performance Indicators (KPIs). In today's high speed |
| advances in managing supplier relationships. The day | | | | world, SRM is on the forefront of any successful |
| of managing suppliers with spreadsheets are gone, | | | | company. SRM has changed significantly over the last |
| and SRM is increasingly complex. Companies are | | | | couple of years, and suppliers are now seen as an |
| demanding increased visibility. The need for real time | | | | extension of the business. |