Supplier Relationship Management in the Context of Supply Chain Management

Keely L. Croxton, Ph.D.

Asst. Professor of Logistics

The Ohio State University

What is Supply Chain Management?

According to The Global Supply Chain Forum

Supply chain management is the integration of key business processes from end user through original supplier that provides products, services, and information that add value for customers and other stakeholders.

Source: Lambert, Douglas M., Martha C. Cooper and Janus D. Pagh, Supply Chain Management: Implementation Issues and Research Opportunities, The International Journal of Logistics Management, Vol. 9, No. 2, 1998, p.2.

Integrating Key Business Processes

Information Flow
Manufacturer Logistics Purchasing PRODUCT FLOW Production R&D Supply Chain Management Processes CUSTOMER RELATIONSHIP MANAGEMENT CUSTOMER SERVICE MANAGEMENT DEMAND MANAGEMENT ORDER FULFILLMENT MANUFACTURING FLOW MANAGEMENT SUPPLIER RELATIONSHIP MANAGEMENT PRODUCT DEVELOPMENT AND COMMERCIALIZATION RETURNS MANAGEMENT Finance Marketing Customer

Tier 2 Supplier

Tier 1 Supplier

Consumer/ End-Customer

Source: Adapted from Douglas M. Lambert, Martha C. Cooper and Janus D. Pagh, "Supply Chain Management: Implementation Issues and Research Opportunities, The International Journal of Logistics Management, Vol. 9, No. 2 (1998), p. 2.

The Processes
Customer Relationship Management - provides the structure for how relationships with customers are developed & maintained, including the PSAs between the firm & its customers.
Customer Service Management - provides the firms face to the customer, including management of the PSAs, and provides a single source of customer information. Demand Management provides the structure for balancing the customers requirements with supply chain capabilities. Order Fulfillment includes all activities necessary to define customer requirements, design the logistics network, and fill customer orders. Manufacturing Flow Management - includes all activities necessary to move products through the plants & to obtain & manage manufacturing flexibility in the supply chain. Supplier Relationship Management - provides the structure for how relationships with suppliers are developed & maintained, including the PSAs between the firm & its suppliers.

Product Development and Commercialization provides the structure for developing and bringing to market new products jointly with customers and suppliers.
Returns Management includes all activities related to returns, reverse logistics, gatekeeping, & avoidance.
Source: Keely L. Croxton, Sebastin J. Garca-Dastugue, Douglas M. Lambert, and Dale S. Rogers, The Supply Chain Management Processes, The International Journal of Logistics Management, Vol. 12, No. 2, 2001, p. 25.

Why Integrate?
Because
there might be potential for competitive advantages, competitors might already be working on it, it should bring more stability to the relationship, It should bring improvements to customer service,

profits, costs,
technology is driving businesses in that direction,

the world is becoming more global and business

practices are changing,

companies tend to focus on their core competencies,

when these systems have been implemented they

become an intangible asset.

Types of Inter-Company Business Process Links

Tier 3 to Initial suppliers Tier 2 Suppliers Tier 1 Suppliers Tier 1 Customers Tier 2 Customers
1

Tier 3 to Consumers/ End-customers

1 2 n 1 2 n 1 3 2 3 n n n 3 1 n 2 1

n 1

1 n 1 2

1
n Managed Process Links Monitor Process Links Not-Managed Process Links Non-Member Process Links

1 n n Focal Company Members of the Focal Companys Supply Chain Non-members of the Focal Companys Supply Chain

Source: Douglas M. Lambert, Martha C. Cooper, and Janus D. Pagh, Supply Chain Management: Implementation Issues and Research Opportunities, The International Journal of Logistics Management, Vol. 9, No. 2, 1998, p. 7.

Consumers/End-customers

Initial Suppliers

Supplier Relationship Management

Strategic Sub-Processes
Review Corporate, Manufacturing and Sourcing Strategies

Process Interfaces
Customer Relationship Management

Operational Sub-Processes

Differentiate Suppliers

Customer Service Management Identify Criteria for Categorizing Suppliers Demand Management

Prepare the Supplier/Segment Management Team

Internally Review the Supplier/ Supplier Segment

Provide Guidelines for the Degree of Customization in the Product/Service Agreement

Order Fulfillment

Identify Opportunities with the Suppliers

Manufacturing Flow Management Develop Framework of Metrics

Develop Product/Service Agreement and Communication Plan

Product Development & Commercialization

Develop Guidelines for Sharing Process Improvement Benefits with Suppliers

Implement the Product/Service Agreement

Returns Management

Measure Performance and Generate Supplier Cost/Profitability Reports

Source: Keely L. Croxton, Sebastin J. Garca-Dastugue, Douglas M. Lambert, and Dale S. Rogers, The Supply Chain Management Processes, The International Journal of Logistics Management, Vol. 12, No. 2, 2001, p. 25.

Customer Relationship Management

Strategic Sub-Processes
Review Corporate and Marketing Strategy

Process Interfaces
Customer Service Management

Operational Sub-Processes
Differentiate Customers

Identify Criteria for Categorizing Customers

Demand Management

Prepare the Account/Segment Management Team

Order Fulfillment

Internally Review the Accounts

Provide Guidelines for the Degree of Differentiation in the Product/Service Agreement

Manufacturing Flow Management

Identify Opportunities with the Accounts

Supplier Relationship Management Develop Framework for Metrics Product Development & Commercialization

Develop the Product/Service Agreement

Implement the Product/service Agreement

Develop Guidelines for Sharing Process Improvement Benefits with Customers

Returns Management

Measure Performance and Generate Profitability Reports

Source: Keely L. Croxton, Sebastin J. Garca-Dastugue, Douglas M. Lambert, and Dale S. Rogers, The Supply Chain Management Processes, The International Journal of Logistics Management, Vol. 12, No. 2, 2001, p. 15.

Types of Relationships

Partnerships

Arms Length

Type I

Type II

Type III

Joint Ventures

Vertical Integration

The Global Supply Chain Forum, 2000

Partnership - Definition
A partnership is a tailored business relationship based on mutual trust, openness, shared risk and shared rewards that results in business performance

greater than would be achieved by two firms working

together in the absence of partnership.

The Global Supply Chain Forum, 2000

The Partnership Model

Drivers
Compelling reasons to partner Decision to create or adjust relationship

Facilitators
Supportive environmental factors that enhance partnership growth

Components
Drivers set expectations of outcomes Joint activities and processes that build and sustain the partnership

Feedback to:
l Components l Drivers l Facilitators

Outcomes
The extent to which performance meets expectations

The Global Supply Chain Forum, 2000

Thank you!