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 APICS Article

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 marketplace.

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.

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Last updated: 02/10/2006