CREATING AND
MANAGING SUPPLIER
RELATIONSHIPS
KEYS TO SUCCESSFUL PARTNERSHIPS
Strong supplier partnerships
Important to achieving win-win competitive performance for the
buyer and supplier -- these require a strategic perspective as
opposed to a tactical position
Involve “a mutual commitment over an extended time to work
together to the mutual benefit of both parties, sharing relevant
information and the risks and rewards of the relationship”
KEYS TO SUCCESSFUL PARTNERSHIPS
Building Trust
With trust, partners are more willing to work together, find
compromise solutions to problems, work toward achieving long-term
benefits for both parties, &, in short, go to the extra mile.
Shared Vision & Objectives
Both partners must share the same vision & have objectives that are
not only clear but mutually agreeable. The focus must move beyond
tactical issues & toward a more strategic path to corporate success.
KEYS TO SUCCESSFUL
PARTNERSHIPS
Personal Business Relationships
It is people who communicate & make things happen
Mutual Benefits & Needs
Partnership should result in a win-win situation, which can only be
achieved if both companies have compatible needs.
KEYS TO SUCCESSFUL PARTNERSHIPS
Commitment & Top Management Support
Both parties must dedicate their time, best people, and resources
to make the partnership succeed
Partnerships tend to be successful when top executives are
actively supporting the partnership
Change Management
Companies must be prepared to manage change that comes with
the formation of new partnerships
KEYS TO SUCCESSFUL PARTNERSHIPS
Hewlett Packard identified several key steps to ensure
better change management
Identify internal champions
Secure executive buy-in
Coordinate internal communication and support teams
Train and survey impacted managers
Conduct business reviews with key client groups
KEYS TO SUCCESSFUL PARTNERSHIPS
Information Sharing & Lines of Communication
Both formal & informal lines of communication should be set up to
facilitate free flow of information
Confidentiality of sensitive information must be maintained
Relationship Capabilities
Suppliers must have the right technology & capabilities to meet
cost, quality, & delivery requirements
Suppliers must flexible to respond quickly to changing customer
requirements
KEYS TO SUCCESSFUL PARTNERSHIPS
Performance Metrics
You can’t improve what you don’t measure
Measures related to quality, cost, delivery, & flexibility are used to
evaluate suppliers.
Metrics should be:1) understandable, 2) easy to measure, & 3) focused
on real value-added results
A multi-criteria approach is best
Total cost of ownership (TCO), is made up of all costs associated
w/acquisition, use, & maintenance of a good or service
SUPPLIER EVALUATION & CERTIFICATION
A process to identify best & most reliable suppliers
Frequent feedback can help avoid surprises & maintain good
relationships
Suppliers should be allowed to provide constructive
feedback to the customer
Supplier Certification refers to “an organization’s process for
evaluating the quality systems of key suppliers in an effort to
eliminate incoming inspections.” -Institute for Supply
Management
SUPPLIER EVALUATION & CERTIFICATION
Criteria Used in Certification Programs
No incoming product lot rejections (e.g., less than 0.5 percent defective) for
a specified time period.
No incoming late delivery for a specified time period
No significant supplier production-related negative incidents for a specified
time period
ISO 9000/Q9000/14001 certified or successfully passing a recent, on-site
quality system evaluation
Mutually agreed-upon set of clearly specified quality performance measures
Fully documented process & quality system with cost controls & continuous
improvement capabilities.
SUPPLIER EVALUATION & CERTIFICATION
The Weighted-Criteria Evaluation System
1. Select key dimensions of performance mutually acceptable to both
customer & supplier.
2. Monitor & collect performance data.
3. Assign weights to each of the dimensions.
4. Evaluate performance measures between 0 & 100.
5. Multiply dimension rating by their respective importance weight &
then, sum to get the overall score.
6. Classify vendors based on their overall score: Unacceptable,
Conditional, Certified, & Preferred
7. Audit & perform ongoing certification review
SUPPLIER EVALUATION & CERTIFICATION
Supplier Scorecard Used for the Company
Performance Measure Rating × Weight = Final Value
Technology 80 0.10 8.00
Responsiveness 90 0.25 22.50
Delivery 95 0.15 14.25
Cost 80 0.15 12.00
Environmental 90 0.05 4.50
Business 90 0.15 13.50
Empty Cell Total score 1.00 88.25
CLASSIFICATION OF VENDOR BASED ON
SCORES
Unacceptable (less than 50)
Conditional (between 50 – 70)
Certified (70 – 90)
Preferred (>90)
SUPPLIER EVALUATION &
CERTIFICATION
ISO 9000
Developed by International Organization for Standardization (ISO)
Series of management & quality standards in design, development,
production, installation, & service
Companies looking to sell in the global market seek ISO 9001
certification
SUPPLIER EVALUATION & CERTIFICATION
Standards in the ISO 9000 family
ISO 9001:2015 - sets out the requirements of a quality
management system
ISO 9004:2009 - focuses on how to make a quality management
system more efficient and effective
ISO 19011:2011 - sets out guidance on internal and external audits
of quality management systems
SUPPLIER EVALUATION &
CERTIFICATION
ISO 14000
Family of standards for environmental management
Benefits include:
Reduced energy consumption
Environmental liability
Reduced waste & pollution
Improved community goodwill
SUPPLIER DEVELOPMENT
Seven-step approach to supplier development
1. Identify critical products & services
2. Identify critical suppliers not meeting performance requirements
3. Form a cross-functional team
4. Meet with top management of supplier
5. Rank supplier development projects
6. Define details of Agreement
7. Monitor status & modify strategies
SUPPLIER RECOGNITION
PROGRAMS
Three Attributes –
Companies should recognize & celebrate the achievements
of their best suppliers
Award winners exhibits true partnerships continuous
improvement, organizational commitment, & excellence
Award-winning suppliers serve as role models for other
suppliers
SUPPLIER RELATIONSHIP
MANAGEMENT
Streamlining processes and communication between buyer
and supplier using software applications
SRM software automates the exchange of information
resulting in:
improved procurement efficiency
lower business costs
real-time visibility
faster communication between buyer and seller
enhanced supply chain collaboration
SUPPLIER RELATIONSHIP MANAGEMENT
Five key points of an SRM system
1. Automation handles routine transactions
2. Integration spans multiple departments, processes, &
software applications
3. Visibility of information & process flows
4. Collaboration through information sharing
5. Optimization of processes & decision making
SUPPLIER RELATIONSHIP MANAGEMENT
Transactional SRM - used to track supplier interactions such
as order planning, order payment and returns
focuses on short-term reporting and is event driven
Analytic SRM allows the company to analyze the complete
supplier base
focuses on long-term procurement strategies
THANK YOU
