Page 319 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes getting into Maruti; if the pollution levels are not right then the truck is sent back. This makes
their vendors understand that Maruti cares about the environment.
Maruti’s Kaizen theme is to make its things smaller, fewer, lighter, shorter and beautiful. They
follow it in their plant and have been continuously teaching their vendors this practice. It
conserves the usage of material and yield improvement. They, along with CII and USAID, have
started a programme to help their suppliers acquire ISO 14000 certification. They have also
started a programme on ELV compliance. Though this is not required in India, the idea is that by
the time the requirement will come to India, their vendors will all be sufficiently equipped to
take care of that. They also have a vendor finance cost reduction programme. They line up with
banks to see that loans of their suppliers can be transferred to lower interest rates etc. Through
these initiatives, Maruti has become more agile and leaner.

As you can see, to excel in Supplier Relationship Management is complex. It takes much effort and
work. You need to balance motivation with jeopardy. However, the results make it worthwhile.
In 2005–06, Maruti trained around 16 vendors and ultimately the savings of man hours per day
came to 1,580 man hours, which has resulted in a saving of over one crore rupees per annum. They
were able to reduce component costs on the Alto alone, from 2001 to 2005, by 29 percent.
What is true for Supplier Relationship Management is true for all other relationships in a supply
chain. Relationship management is a critical component of SCM. It creates reciprocal,
interdependent, and long-term relationships. Its objective is to improve the quality of interaction
of organizations (e.g. buyers and sellers), and take steps so that they can cooperate and
communicate better, they can develop trust, and can mutually develop the types of governance
structures that are necessary to contribute to the efficiency of the supply chain.

This is the strategic role of Supplier–Buyer Relationship. It describes the management of such
relationships. It also discusses why firms enter into inter-firm collaborative arrangements through
the supply chain and how do they share risks and rewards.

14.1.1 Relationship Management

Relationships have traditionally been considered as intangible. For more than half a century,
there has been a debate about the value of tangible and intangible assets to organizations. Of late,
many have come to believe that intangible assets play a very important part in today’s competitive
environment and can be sources of competitive advantage and above normal financial returns.
When we talk of intangible assets, we are principally talking of two related types of intangible
assets:
 Relational: Relational market-based assets are outcomes of the relationship between a
firm and key external stakeholders, including distributors, retailers, end-customers, other
strategic partners, community groups, and even governmental agencies; and

 Intellectual: Intellectual market-based assets are the types of knowledge a firm possesses
about the environment, such as the emerging and potential state of market conditions,
and the entities in it such as competitors, customers, channels, suppliers and social and
activist groups.

Did u know? Our discussion is limited to the former. Relational assets arise from the co-
mingling of the firm with entities in its external environment i.e. with its stakeholders. It
becomes an asset only when a company plays to its social strengths in a domain where its
stakeholders (customers and interested parties) are evidently active.

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