The 3 Aspects of Supplier Relationship Management (srm)
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Briefly describe the 3 aspects of Supplier Relationship Management (SRM)
SRM can be broken down into three different aspects:
Strategic Supply Management – Ensures that a company has the right set of suppliers, that the suppliers are performing and that the company is paying the best possible prices. The key strategic decisions in supply management center in which supplier to pursue and what kind of relationships to maintain with suppliers. Strategic supply management is founded on the conviction that a significant, sustainable competitive advantage can be gained from the suppliers an organization has developed and its supply systems and supplier relationships (Johnson & Flynn, pg.371 ).
Supply Chain Collaboration – Allows a company to share information with its suppliers in real time, cutting materials costs, minimizing inventory, and reducing shortages and expediting. Supply chain collaboration is a process, anchored in a strategic relationship between two parties (e.g., supplier and customer). Organizations are increasingly relying on supplier collaboration in areas such as cost reduction/avoidance, product/service development, improvements to quality, and development of new technologies. Supplier collaboration requires a governance structure that addresses process issues such as communication flows, personnel assignments, financial obligations, resource requirements, sharing of benefits and intellectual property, and termination (Johnson & Flynn, pg. 524).
Direct Materials Procurement Execution – Uses the Internet to automate the process of dealing with suppliers. Benefits include cutting cycle times, increasing inventory turns, and allowing purchasers to eliminate low-value activities and focus on important issues (MRU eProcurement, pg. 29).
Can you name some companies that use SRM and describe how they do so?
The interest in supplier partnerships/supplier relationship management was popularized in the 1980s by the study of Japanese companies that maintained close relationships with their suppliers. This was one of the key elements in the achievement of quality, fast delivery, and continuous improvement. Early adopters in North America included companies like Honeywell, Xerox, Polaroid, Motorola, and IBM (Johnson & Flynn, pg. 378).
Honeywell has developed a distinctive approach to supplier relationship management which contains the following key components:
Honeywell does not always buy from lower cost supplier, instead it buys from suppliers that it believes will provide it the lowest cost in the “long term”.
Honeywell is shifting towards longer-term relationships with its suppliers and is treating their suppliers as if they are extensions of its businesses, rather than vendors
Honeywell