Page 169 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Production and Operations Management

Notes 8.4.4 Supplier Relationship Management (SRM) Focus

The SRM macro process aims to arrange for and manage supply sources for various goods and
services. Supplier relationship management is a comprehensive approach to managing an
enterprise’s interactions with suppliers. Its objective is to streamline and make more effective
the processes between an enterprise and its suppliers. This is in a sense similar to customer
relationship management (CRM) which streamlines and makes more effective the processes
between the firm and its customers.
SRM reflects the need to integrate the entire supply chain – and to do so in a way that preserves
flexibility, opens its enterprise infrastructure to the inventions, expertise and networks of others,
and lets them shed the bits of the supply chain that can be better run by partners. SRM practices
create a common frame of reference to enable effective communication between an enterprise
and suppliers who may use quite different business practices and terminology. SRM processes
include the evaluation and selection of suppliers, negotiation of supply terms, communication
regarding new product and orders with suppliers and integration with the expertise of others.
All the three macro processes are aimed at serving the same customer. However, integration of
the systems is to a large degree dependent on the organizational structure of the firm. In many
firms, marketing is in charge of the CRM macro process, manufacturing handles the ISCM
macro process and purchasing oversees the SRM. Integration between the three macro processes
is crucial for successful supply chain. Use of databases, communication systems, and foremost
advanced computer software are crucial for the development of a modern cost-effective integrated
SCM.
The collaboration and coordination costs of the supply chain increase with the speed of change
in the marketplace. A proactive approach to manage customer demands is necessary to stay
competitive. This requires flexibility in the supply chain while cutting hidden costs and reducing
transaction costs.
For example, Speeding up sharing of information through electronic means, can help partners
lower production cycle times and inventory can be viewed on a real-time basis so forecasting
errors can be reduced. This will contribute to the objectives of satisfied customers and low costs.

Self Assessment

Fill in the blanks:
10. There are three types of vendor relationships which are Transactional, Collaborative, and
……………… .
11. The three factors required for a successful collaborative relationship are Two-way
communication, Responsiveness to supply management’s needs, and……………… .

12. The supplier-buyer relationships have seen a paradigm change in the transition from
Materials Management to ……………… Management.

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Caselet Wal-Mart’s “Green” Supply Chain Management

upply chain management has been the cornerstone to Wal-Mart’s success and remains
their primary competitive advantage in the retail/department store industry. Their
Sdistribution system is generally regarded as the most efficient and they have an

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