Your Supplier is Your Competitive Advantage
By Carleen Wong, CPIM
For many companies, externally sourced goods and services represent
significant costs and revenues. As supply chain practitioners,
we have the responsibility to find, develop, and retain the best
suppliers we can. By doing this process well, it will contribute
towards enhancing your company’s competitive advantage in the
Over the past two decades, the purchasing responsibility has
evolved from being one of issuing orders and expediting them to
becoming strategic buyers. The emphasis now is on truly building
collaborative, long-term relationships with suppliers. It means
having fewer suppliers and leveraging those relationships to mutually
decrease costs and increase revenues.
You may have heard of SRM, yet another new acronym in the supply
chain world! It stands for Supplier Relationship Management, a
term that has emerged in the strategic purchasing process. A strong
SRM program includes the following:
- A written strategy for each major commodity class or category
that includes how it supports the overall business objectives,
its sourcing strategy, management, and performance targets.
Appropriate aspects of this strategy should be shared with suppliers.
- Clearly understood and written supplier contracts/agreements
that ensures all parties perform to the requirements and expectations.
- Supplier evaluation programs using tools such as metrics,
scorecards, and performance recognition awards. Traditional
measures include product quality, customer service, on-time
and in-full delivery, response time, and product pricing. Other
measures could involve technical expertise, corrective action,
and cost reduction programs.
- Encouragement of suppliers’ feedback to provide opportunities
for continuous improvements and innovations in the supply chain.
- Companies can maximize added value with suppliers by involving
them early in the design process. By taking advantage of the
suppliers’ expertise and capabilities, a better and less costly
product, service or technology can be made. A supplier should
be viewed as an extension of a company’s business.
- Collaborative efforts between parties to share critical information,
such as forecasting, and to streamline business processes, such
as reduced purchase order frequency.
- Internally, request and manage feedback within your organization
on their experience with suppliers.
- Share responsibility and accountability for suppliers in your
company among those involved in the process, such as R&D, quality
assurance, manufacturing, finance, etc.
By prioritizing and implementing the elements of a SRM program,
you will be on your way to building strong relationships with
your suppliers and internally within your company. Your organization
will maximize its product and process potential, increase customer
satisfaction, decrease costs, and increase revenues. Your supplier
will become your competitive advantage in the marketplace.