Page 320 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Unit 14: Supply Chain Logistics Administration

Relational assets have become increasingly important to organizations as one of the impacts of Notes
the internet has been to move the market and its value drivers into the desires and ambitions of
the stakeholders. Organizations have become increasingly aware that they have to make
relationship management work, as it is a source of competitive advantage.
This important function has, to a large extent, become the responsibility of the supply chain.
The supply chain is basically a customer focused, value maximizing function of an organization.
In recent years, it has also become a strategic weapon for competitive advantage. The most
difficult of all the activities supply chain managers perform now, is perhaps relationship
management.

Relationship management focuses on improving operations and supply chain performance by
eliciting the cooperation of other firms. Underlying the challenge is the question; how best can
trust between buyer and supplier be institutionalized, especially as trust is most susceptible to
break down.
Trust is developed by doing things jointly and in an aligned fashion over a period of time. There
should be no major surprises. Surprises create a poor relationship. If this happens within any
link of the supply chain, it can be disastrous for all other supply chain members. With the stakes
so high, failure is unacceptable. This is reflected with the progressive increase in the number of
companies putting an emphasis on relationship management.

In order to create an efficient and successful supply chain, organizations have to manage the
relationships on all fronts – with their upstream suppliers, their internal suppliers, as well as
their downstream customers. The buyer and seller, in each of these relationships, need to see
each other as partners, each helping the other as much as possible.
The cooperative orientation of relationships means long-term commitment, joint work on quality,
and support by the buyer of the supplier’s managerial, technological, and capacity development
and vice-versa. In India, it may not be easy to develop strong supply chain relationships like
those found in Japan. However, in such environments, it becomes even more important to focus
on these relationships.

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Caution Within a firm, all supply chain activities can be related to one of three macro
processes, the customer, the internal supply chain processes, and/or the supplier processes.
This, in turn, can be translated into three types of ‘focuses’ – Customer focus, Internal
Supply focus, and/or Supplier focus.
Based on the focus of the processes, the supply chain relationship management processes can be
classified into the following:
1. Customer Relationship Management (CRM): All processes that focus on the interface
between the firm and its customers.
2. Internal Supply Chain Management (ISCM): All processes that are internal to the firm.
3. Supplier Relationship Management (SRM): All processes that focus on the interface between
the firm and its suppliers.
The three macro processes manage the flow of information, product, and funds required to
generate, receive, and fulfill a customer request. Table 14.1 gives an overview of the three
processes.

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