Supplier-Customer Relationship Management

These study notes are in use of many institute of supply chain management for their courses outline for supply chain management degree, diploma in supply chain management and supply chain management courses now I am posting this on internet lets start.

Since purchased components account for over 55% of the cost of goods and suppliers are responsible for over 50% of a firm's product quality problems, the relationship between the supplier and buyer is critical. Quality is the most important factor for companies in their relationship between suppliers and customers (Sila et al., 2006). Therefore, supplier and customer relationship management processes can enhance or inhibit competition. Critical processes to this relationship include communication, mutual assistance on new product development, and training. Strong relationships develop win-win relationships, trust, openness and honesty. However, this is easier said than done. As recently as the turn of the century at Whirlpool, little integration between supply chain members existed as different levels of the supply chain had different quality standards and goals (Roethlein et al., 2000). In fact, raw material providers did not understand where their products would finally end up, let alone the quality goals of members further down the chain.

(These notes are personally my theses which I wrote for my supply chain management degree program which I completed from Pacific institute of supply chain management and now I am posting these notes or theses for my students who are mostly from diploma in supply chain management and supply chain management courses certification)

Supplier certification programs incorporate quality and delivery factors into the vendor selection process, which improves quality and delivery while reducing costs. Similarly, when applied to supply chain processes, a certification process assists with supplier selection and supply base optimization, a process to find the optimal number and mix of suppliers. At Alcoa, a world leader in aluminum and related products production, a comprehensive supplier certification program jointly improves quality and reduces costs for Alcoa and their suppliers (Monczka et al., 2009). As a follow-up to supplier selection, supplier performance rating systems assist with developing a stronger linkage between supplier and buyer through developing a win-win relationship for both partners, and assist with standardizing and homogenizing quality goals throughout the supply chain. Process improvements also assist with communication improvements to communicate quality requirements with suppliers, and using performance measurement systems, supplier improvement programs can be developed.

Improvements to the supplier-customer relationship management exist in the eight key principles of Total Quality Management. To begin, communication of quality requirements from the buyer in term of final customers is critical. Supplier certification processes assist with pursuing quality at the source, while statistical quality controls can monitor and control product and process issues. Objective (measured) instead of subjective (opinion based) facts should be shared between supply chain members. A system to monitor and correct defects throughout the supply chain, without pointing blame is imperative.

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Performance data should guide quality and supply chain improvements. With respect to sourcing, supply managers can use data to develop preferred supplier lists, provide feedback to current suppliers, and monitor and improve relationships, products and processes. Total Quality Management programs between suppliers and buyers should focus on prevention of defects, and product and process variance reduction through programs such as supplier certification programs. Monitoring should shift from product monitoring to process monitoring for consistency and reducing variation. A working supplier evaluation and selection system, benchmarking, reduction of duplicated processes, and knowledge transfer between functional units and across member boundaries can assist with the shift to process evaluation. ISO9000, the Malcolm Aldridge National Quality Award, and similar awards are critical factors to consider in the selection system. Another critical aspect in this relationship is developing a viable measure and understanding by supply chain members for process capability. Supplier evaluation and supply base rationalization processes can assist with improving supply chain quality throughout the system as variation between suppliers is reduced and product quality can be improved. As previously discussed, value analysis and value engineering can assist in developing a culture of continuous improvement throughout the supply chain. Similarly including - and rewarding, suppliers for participation in improvement programs can enhance the relationship and reap benefits for both members. The supplier-buyer relationship between supply chain members requires that quality start at the top