Summary Chapter Fifteen (15) Supplier Partnership Learning Objectives: Definition of Supplier Partnership. Vision, Mission and Goals of supplier partnership Reasons, Principles, Sourcing, selection of suppliers. Pitfalls and Benefits of Supplier partnership. Introduction: There are benefits to having a collaborative, collegial relationship with your suppliers. In today's networked economy, few companies do everything on their own. Suppliers help companies build better products and services. A partnership can give suppliers greater visibility into how you operate, enabling you and your suppliers to collaborate by reducing costs, improving service and quality, and even innovating. And as more work gets outsourced, a company's dependency on suppliers will increase. Holding a critical supplier at arm's length doesn't work; you need a trusted partner to ensure quality of performance. Organization and suppliers have the same goal to satisfy the end user. Definition of supplier Partnership A commitment over an extended time to work together to the mutual benefit of parties, sharing relevant information and the risks and rewards of the relationship. These relationships require a clear understanding of expectations, open communication and information exchange, mutual trust and a common direction for the futur Prep. By: Hemkant Deshpande Page 1
How to Sustain Successful Supplier/Buyer Partnerships Supplier relationship management strategies should emphasize 1. Compliance It is incumbent upon the importer or exporter to take necessary steps to ensure that all parties in the supply chain are approved and are not restricted in any way. 2. Conduct As companies are more in tune with social responsibility, they are cognizant of its presence (or lack thereof) throughout the supply chain, and need to ensure goods are sourced from suppliers that are fulfilling their codes of conduct and maintaining their own level of financial, environmental and social responsibility. 3. Strategic financing. While the buyer is looking to get a fair (not always lowest) price, the supplier has to ensure he is covering costs and, of course, making a profit. It is not always in the buyer's interest to negotiate down to the very lowest price; the result can be less trust or loyalty from the vendor. The relationship between a supplier and buyer can be complex, because each party wants to maximize its time, resources and cash investment. These resources may be competing priorities that can strain the relationship. What's required to sustain a mutually beneficial relationship is an understanding of each other's business needs. To develop and subsequently maintain a positive supplier-buyer relationship, manufacturers should regularly address compliance, conduct and strategic financing concerns with their supply chain partners Reasons for partnership. 1) Quality and timely delivery. 2) JIT(Just in Time) concept. 3) Practice of continuous process improvement 4) Quality assurance systems (ISO 9000, etc.) 5) Increased efficiency, Prep. By: Hemkant Deshpande Page 2
6) Lower cost, Principles of customer/supplier relations Following principles are very important for mutually beneficialand sustainable relationship. 1. Both the customer and the supplier are fully responsible for the control of the quality 2. Both the customer and the supplier should be independent of each other and respect each other s independence. 3. The customer is responsible for providing the supplier with clear and sufficient requirements so that the supplier can know exactly what to produce. 4. Both the customer and the supplier should enter a contract with respect to quality, quantity, price, delivery method, and terms of payments. 5. The supplier is responsible for providing the quality that will satisfy the customer and submitting necessary related with customer s needs. 6. Product quality evaluation methods should be decided by the mutual consent of both the parties. 7. Amicable settlement of disputes between customer and supplier should be established in the contract. 8. Continuous information exchange will improve the product or service quality. 9. To maintain an amicable relationship, both the parties should do procurement, production, and inventory planning. 10. Best interest of the end user should be considered while doing business transactions. When these principles are followed in right sprit it develops very strong emotional bond between customer and supplier that is essential for growth. Prep. By: Hemkant Deshpande Page 3
Sourcing, Selection and ratings of suppliers Sourcing, Selection and rating of suppliers is important from long term relation point of view. Sourcing: Sole sourcing Multiple sourcing Single sourcing Supplier Selection: Supplier selection is based on quality, price and delivery,effective quality system and improvement program. Supplier Rating: Supplier rating is a very effective measure of communicating his performance over period of time (Generally one year). This bring clarity between supplier and customer about each other s expectations. Supplier Certification American society of Quality Control (ASQC) has developed certification criteria. Benefits of certification include: 1) Customer/supplier partnership 2) Direct shipment to stock 3) Reduction of supplier numbers to a manageable level. Benefits of Supplier Partnership Expanded recognition in variety of media and events throughout a calendar year. Being a supplier partner, it will increase: 1) Awareness of your company. 2) Elevate your corporate image. Prep. By: Hemkant Deshpande Page 4
3) Enhance your reputation as a company dedicated to positive development of industry. Prep. By: Hemkant Deshpande Page 5