Julie Fraser: Managing supplier relationships beyond strategic sourcing
Strategic sourcing is a critical start to a supplier relationship, but it is not sufficient. So why is it that we hear so little about supplier relationship management (SRM)?
High profile news stories about
tainted or unsafe toys, food, computers, and pharmaceuticals point to a problem
every manufacturer faces: managing suppliers. Companies can suffer immeasurable
brand damage when a supplier’s quality slips, not to mention the more concrete
costs of recalls, customer alerts, and lawsuits.
As industry networks stretch beyond
traditional regional boundaries and companies seek to limit travel, differences
in communication styles and culture will only increase these risks. Strategic
sourcing is a critical start to a supplier relationship, but it is not nearly
sufficient. Once a supplier is selected, the ongoing work of monitoring and
helping improve their performance and practices begins.
This involves rationalizing and
consolidating sourcing, managing parts and suppliers, controlling contracts
through their lifecycle, evaluating and delivering supplier scorecards, and
collaborating with suppliers to better ensure mutual success. So why is it that
we hear so little about supplier relationship management (SRM)?
One reason may be that it’s now
often a component part of larger software suites. For example, i2, Oracle, SAP, IBM
and JDA, all have acquired and subsequently built out SRM
capabilities as part of their supply chain capabilities.
companies have also extended into certain areas of SRM.
Siemens PLM has Teamcenter for SRM with its services partner CapGemini. Dassault
works with i2. Most of the PLM
focus is on sourcing and supplier selection, but it can be extended across the
The supplier selection process can
also be supported by buying sites such as GlobalSpec, PartMiner, and Mfg.com. Look
for the ability to build up relationship data and scorecards over time, not
just during selection.
A private or public network can be a
dynamic and low-infrastructure means to collaborate and manage suppliers
effectively. While exchanges such as Axway, ChemConnect, DemandTech, e2open, Exostar,
and GXS started as EDI-focused, these now provide deeper buyer-supplier
There is one other angle of supplier
relationship management that is not well known, and it may be a cornerstone to
success in this volatile environment: supplier risk management.
Such software can help predict
whether and when a supplier will have a glitch-whether in finances, quality, or
delivery. Dun & Bradstreet has added this capability to its portfolio
through acquisition, and has some major customers reaping extraordinary
Companies must learn to work with
suppliers as effectively as if they were part of their own company. This
requires a new level of communication and collaboration to build the trust and
visibility that allows everyone to truly create win-win situations. SRM can contribute to:
Perhaps this is the year-while
volumes for many products are relatively low-that companies will re-focus on
the supply base. SRM is not the
answer to the questions, but it can reduce the effort needed, and help ensure
that sound processes are in place and working reliably.
Fraser is Principal Industry Analyst at Cambashi, and has been an industry
analyst, consultant and marketer for over 20 years, specializing in manufacturing
value network processes and systems. She can be reached through Manufacturing Business Technology or at Julie.firstname.lastname@example.org .
risk concerns shift, grow by Roberto Michel