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Benefits from Formally Managed Supplier Relationships
The components which comprise Supplier Relationship Management provide a high
level of assurance, at a relatively low cost that contractual deliverables,
and relationship objectives are met, by concentrating management effort through a well
defined and focused team.
An SRM approach provides benefits to suppliers and customers!
Major deals are expensive to pursue. Set up costs for each party may
be six or seven figure sums, and deals take many months to complete. Neither
party wants to incur:
- damaged reputation from disputes
- unnecessary costs associated with either re-negotiating or early exiting
of a contract
- financial consequences resulting from poor performance
An early analysis of each organisation's culture, values and expectations for
the relationship, can help to ensure that the relationship matures to mutual
benefit
If you are a supplier and believe Supplier Relationship Management to be:
- appropriate to customer organisations only
- a tool to control or regulate suppliers
- something you would be better off without
.. then please read on!
Supplier Relationship Management should be about management of
the relationship between a Customer organisation and a Supplier, to
the mutual benefit of both parties. This is the only basis upon which a
long term commercial relationship can be founded. This requires both parties to have a mutual respect and
understanding for each other's business, and the rights of each business to make
profit. This is the basis for a partnership.
Some of the advantages to suppliers from an SRM
implementation:
- It provides formal routes of engagement at different levels of management
allowing further supplier business opportunities to be exploited at senior
levels
- Ensures that operational level process mapping is undertaken,
so a supplier is in possession of all details it needs to be able to perform
- Ensures that customer's obligations to the supplier are identified and managed.
- Provides forums for discussing and resolving supplier
issues, including escalation paths within both organisations
- The approach limits customer influence on the way the supplier
runs
their operation
- Complements a suppliers Key Account Management function.
A customer organisation may benefit from a well managed supplier relationship
through:
Competitive Advantage
- Allows the full potential of the supplier's expertise to be realised in
developing the Customer's business strategy. Early and senior,
formalised engagement will ensure integrated strategies which will enable the
customer to bring new business services/products to market at the earliest
opportunity.
- This benefit will increase over time as trust is established, and both
organisations feel comfortable in sharing strategic plans
Efficiency
- Ensuring maximum use of standardised products and services.
Customised products and services will cost more, and make the organisation
dependent on the supplier, which may also make it difficult to achieve
competitive pricing
- The less interaction there is between the organisations to resolve
incidents, problems or poor performance, the lower will be the costs of
managing the relationship, and the lower will be the costs associated
with quality failure
- Customer organisations using the same standardised approach for a number
of suppliers will gain economies from re-use
- Ensures that supply costs are contained, and that opportunities for
improving the cost effectiveness of services are regularly explored and
progressed
- Helps to ensure that supplier capacity is matched efficiently with demand
Effectiveness
- The longer a supplier works with the customer, the greater will be the
implicit knowledge which the supplier's staff accumulate about the customer,
resulting grey areas being handled 'correctly' more regularly
- Ensures that process linkages are created between the organisations for
all the service management disciplines.
- Ensures that the right people are involved in the right activities at the
right time.
- Limits the people involved to ensure consistency in process and
communication.
- Identifies and involves senior stakeholders, mapping escalation routes and
matching face-offs.
- Takes an active approach to ensuring that contractual performance is met
- Ensures that suppliers continue to improve their own products and
services, in ways which provide most improvement to the customer
organisation's products and services
- Ensures that comprehensive risk management is undertaken, including where
relevant ensuring that statutory and/or regulatory obligations are met
A suitably balanced, and well implemented SRM framework will
ensure that the business and operational interests of both parties are
protected. Essential has a ready formed toolkit which can be used to
profile a particular relationship, and then establish relevant structures and
processes. For more information --> Essential Toolkit
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All pages are copyright: © 2004,2005 Essential
Consultancy Services Limited
The content of these pages represents the
personal views of the author and is provided for information only. The
content does not constitute advice. The reader shall accept responsibility
for all uses to which the information is put.
For help in developing
and implementing, or reviewing the effectiveness of supplier management
arrangements, please contact us:
info@essentialcs.co.uk
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