FUNDAMENTALS OF SUPPLIER RELATIONSHIP MANAGEMENT (SRM)
The course focuses on the 17 key objectives with focus on lowering TCO-Total Cost Of Ownership, two approaches to supplier segmentation, the use of mapping, developing a diverse supply base and supplier audits/evaluations with fundamental exercises and case studies.
According the great B.C. Forbes, the founder of Forbes Magazine: “any business arrangement that is not profitable to the other fellow will in the end prove unprofitable to you. The bargain that yields mutual satisfaction is the only one that is apt to be repeated.” This is another way of stating the age-old golden rule: “do onto others as you want them to do onto you!” This runs 180 degrees counter to an approach advocated by Ignacio Lopez in the early 1990s. If his name does not “ring a bell’’ with you – he was a senior executive with General Motors and during this time, he ran their multi-billion dollar purchasing operations. One of his first actions was to have his hundreds of buyers slash pricing with their thousands of suppliers. This resulted in short-term savings for GM but in the long term – the strained customer-supplier relationships hurt GM as they could not depend on their key suppliers for valuable development inputs.
The lesson that GM as well as the purchasing-SM community learned from this is that you get more with “honey” than with “vinegar.” The bottom-line is that organizations that cultivate good Supplier Relationship Management (SRM) see long-lasting over short-term, benefits. These can include – willingness to jointly reduce cost, providing ESI – Early Supplier Involvement and engaging in value-added programs such as SMI – Supplier Managed Inventory, supplier managed warehousing and overall, innovation.
The starting point in this major initiative is to engage in Supply Base Rationalization (Optimization) which focuses on both the number of suppliers and the mix (relationship that you establish with each one). We also bring in the ever-popular Pareto Analysis (ABC) where you date your “C” suppliers, go steady with your “B” suppliers and get married to your “A” suppliers. In the SM world – you are not committing polygamy by having more than one A-type relationship! This course will analyze a couple approaches to supplier categorization – one is creating Transactional, Collaborative or Strategic relationships. The other is segregating your supply base into alliances – either: Basic, Operational, Business or Strategic. Each one is part of a major initiative referred to as Supplier Segmentation.
The underlying factor is that both the customer and the supplier must have both trust and communication. Another factor reviewed is Supplier Diversity. This involves sourcing suppliers that are recognized as MWBE (Minority Women Business Enterprise) and/or HUB (Historically Underutilized Business – operations located in a low-income area). To make this successful, the buying company must have both senior management support and clearly established goals. Good reporting is also covered in this course which is best achieved by first mapping out the supply chain (a visual representation) and correlating good SRM with CRM – Customer Relationship Management.
Additionally with new sources that you are considering to be approved by your company as well as current suppliers on a periodic basis (so that they do not become complacent), supplier evaluations should conducted. This course will review the key evaluation criteria including financial, quality, overall organization, labor status and performance. However, in line with the “best laid plans can go off direction,” the last part of this course will focus on developing a good “Supplier Exit Strategy” (to be done before the first contract is implemented) such that an “orderly transition” to a replacement source is affected. In summary, this course will explore the benefits and methods in order to have successful customer-supplier relationships aka: SRM.
To support all of the above, this course will be featured in SCE’s virtual classroom with all of the functionality featured in our DEMO and based on our teams working with major corporations in BIC-Best-In-Class practices. It will be a blend of educational topics, pertinent case studies, and practical stories based on past practices. You will learn vital skill sets but also have fun!
Upon completion of the Fundamentals of SRM course, the participant will:
- learn how to rationalize (optimize) their supply base which involves activities such as spend segmentation, leverage through reduction and cultivating key relationships base on the ABC approach
- understand the benefits that result from the above including reduced risk, lower TCO-Total Cost of Ownership (see Applications In Cost Modeling course), pursuit of value added activities and overall, streamlined SCM
- be able to segregate suppliers into the Transactional (tactical price-buy), Collaborative (blanket orders) or Strategic (SMI) categories – approach 1
- compare and contrast the rating categories of Pre-Qualified, Approved, Certifiable, Certified, Preferred, Partnerships or unfortunately, Disqualified
- engage in Supplier Segmentation by following four progressive steps
- review the eight key ways to maintain good supplier relationships from training and education to paying on time
- be able to segregate suppliers into Basic, Operational, Business Strategic categories – approach 2
- explore how supplier innovation (with both customer-supplier inputs) can lead to good SRM
- implement Diversity programs MWBEs and/or HUBs (as noted above) as a social/community responsibility or as a customer/governmental requirement including both issues and elements
- perform Supply Chain Mapping (a visual representation) including various samples and a review of the SCOR – Supply Chain Operations Reference model
- perform detailed financial evaluations on your suppliers with a focus on the Balance Sheet, Income Statement and key ratios
- perform detailed quality evaluations on your suppliers with a focus on the suppliers own incoming quality, testing capability, SPC – Statistical Process Control, and TQM- Total Quality Management
- perform detailed overall supplier organization evaluations with a focus on top management commitment, technical competence and technical support
- perform detailed supplier labor evaluations with a focus on skill sets, training and industrial relations policies
- perform detailed overall performance evaluations with a focus on lead/cycle time reduction, delivery, capacity and productivity
- understand the importance of good housekeeping – “a place for everything and everything in its place”
- create a good Supplier Exit Strategy before the relationship begins if a divorce ensues including internal/external factors and risk
Depending on the learning style of the participant, this course is designed to be approximately 15 hours in the e-Learning – virtual classroom. Additionally, at the end of the course – you will take an on-line quiz to make sure you have grasped the key points.
Upon completion of the Fundamentals of SRM course, the participant will receive a certificate of completion with 15 ceus of credit.
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