Supplier Relation

Q.1 Buying & Selling is B-B activity governed by rational thought, there is scope of relationship If you disagree support. Though Buying and selling is rational, ultimately the interaction is b ! one group "#eople$ in your company and other group in %endor &ompany. Though process is rational or logical since it is dealt by people because it has to be accepted convinced agreed. 'lement of trust b ! the parties !ill help to set up the deal. (o! competition is not bet!een t!o companies, but also bet!een supply chains of the t!o companies ')ample. Tata motor and *sho+ ,eyland Q. &reating relationship b ! the parties is starting point, nurture it and sho! interest is important

Short notes on 1$ Ethics in business -$ System cost reduction using spend analysis (increase the schedule for vendor !ho gives lo!er cost$ .$ To improve relationship use of SRM /$ Zero defect 0$ Single Vendor

Q.1 Buying & Selling is B-B activity governed by rational, though there is scope of relationship

Importance Suppler relationship

Though Buying and selling is rational decision, ultimately the interaction happen b ! one group "#eople$ in your company and other group in %endor1s &ompany. Though process is rational or logical since it is dealt by people because it has to be accepted convinced agreed. 'lement of trust b ! the parties !ill help to set up the deal.

(o! competition is not bet!een t!o companies, but also bet!een supply chains of the t!o companies

Maintaining good relations with a supplier should be as important to a contract

administrator/end user as getting the best price.

A good buyer-seller relationship is a partnership, a win-win situation over the long run.

A supplier who is treated with courtesy, honesty, and fairness will deliver a quality
product at the best price, will provide good service, and will be responsive to emergency situations and special requests. A responsive supplier is always an asset for company

There is also a public relations aspect to purchasing that should not be overlooked. An
organi ation!s public image can be a valuable asset. A supplier who is treated equitably and professionally is likely to communicate his positive e"periences with your organi ation to his associates. Guidelines for Successful supplier Relationships

#se established supplier partnerships to best leverage the collective company volume,
to consolidate orders, and to reduce administrative processing costs. $ou will receive outstanding prices and e"cellent service.

Be fair. %ive all qualified suppliers an equal opportunity to compete for business. Maintain integrity. A supplier!s pricing is confidential and should never be shared
with another supplier for any reason.

 Be honest. &ever inflate requirements to obtain better pricing. &egotiate in good

faith. 'on!t change the requirements and e"pect the supplier to hold his pricing.

Be ethical. (rocurement decisions should be made ob)ectively, free from any personal
considerations or benefits.

Be courteous. A contract administrator/end user should make an effort to receive

sales persons to the e"tent that his or her work schedule permits.

Be reasonable. A supplier is entitled to a fair profit. Pay promptly. The purchase order you issue to the supplier is your promise to pay
for the goods and services you buy in a timely manner *usually within +, days-.

Ethics
.thics concern an individual/s moral )udgments about right and wrong. 'ecisions taken within an organi ation may be made by individuals or groups, but whoever makes them will be influenced by the culture of the company. The decision to behave ethically is a moral one0 employees must decide what they think is the right course of action. This may involve re)ecting the route that would lead to the biggest short-term profit.

Ethical behavior and corporate social responsibility can bring significant benefits to a business. For example, they may:
Attract customers to the firm/s products, thereby boosting sales and profits
increase productivity

Make employees want to stay with the business, reduce labour turnover and therefore Attract more employees wanting to work for the business, reduce recruitment costs
and enable the company to get the most talented employees

Attract investors and keep the company/s share price high, thereby protecting the
business from takeover.

You can refer below if you want

1. 2. 3.

/. Stop business malpractices : Some unscrupulous businessmen do business malpractices by indulging in

unfair trade practices like black-marketing, artificial high pricing, adulteration, cheating in weights and measures, selling of duplicate and harmful products, hoarding, etc. These business malpractices are harmful to the consumers. usiness ethics help to stop these business malpractices.

0. !mpro"e customers# confidence : usiness ethics are needed to impro"e the customers# confidence about
the $uality, $uantity, price, etc. of the products. The customers ha"e more trust and confidence in the businessmen who follow ethical rules. They feel that such businessmen will not cheat them.

2. Sur"i"al of business : usiness ethics are mandatory for the sur"i"al of business. The businessmen who do
not follow it will ha"e short-term success, but they will fail in the long run. This is because they can cheat a consumer only once. %fter that, the consumer will not buy goods from that businessman. &e will also tell others not to buy from that businessman. So this will defame his image and pro"oke a negati"e publicity. This will result in failure of the business. Therefore, if the businessmen do not follow ethical rules, he will fail in the market. So, it is always better to follow appropriate code of conduct to sur"i"e in the market.

3. Safeguarding consumers# rights : The consumer has many rights such as right to health and safety, right to
be informed, right to choose, right to be heard, right to redress, etc. ut many businessmen do not respect and protect these rights. usiness ethics are must to safeguard these rights of the consumers.

4. 'rotecting employees and shareholders : usiness ethics are re$uired to protect the interest of employees,
shareholders, competitors, dealers, suppliers, etc. !t protects them from e(ploitation through unfair trade practices.

5. )e"elops good relations : usiness ethics are important to de"elop good and friendly relations between
business and society. This will result in a regular supply of good $uality goods and ser"ices at low prices to the society. !t will also result in profits for the businesses thereby resulting in growth of economy.

16. *reates good image : usiness ethics create a good image for the business and businessmen. !f the
businessmen follow all ethical rules, then they will be fully accepted and not criticised by the society. The society will always support those businessmen who follow this necessary code of conduct.

11. Smooth functioning : !f the business follows all the business ethics, then the employees, shareholders,
consumers, dealers and suppliers will all be happy. So they will gi"e full cooperation to the business. This will result in smooth functioning of the business. So, the business will grow, e(pand and di"ersify easily and $uickly. !t will ha"e more sales and more profits.

1-. *onsumer mo"ement : usiness ethics are gaining importance because of the growth of the consumer
mo"ement. Today, the consumers are aware of their rights. +ow they are more organised and hence cannot be cheated easily. They take actions against those businessmen who indulge in bad business practices. They boycott poor $uality, harmful, high-priced and counterfeit ,duplicate- goods. Therefore, the only way to sur"i"e in business is to be honest and fair.

1.. *onsumer satisfaction : Today, the consumer is the king of the market. %ny business simply cannot sur"i"e
without the consumers. Therefore, the main aim or ob.ecti"e of business is consumer satisfaction. !f the consumer is not satisfied, then there will be no sales and thus no profits too. *onsumer will be satisfied only if the business follows all the business ethics, and hence are highly needed.

1/. !mportance of labour : /abour, i.e. employees or workers play a "ery crucial role in the success of a
business. Therefore, business must use business ethics while dealing with the employees. The business must gi"e them proper wages and salaries and pro"ide them with better working conditions. There must be good relations between employer and employees. The employees must also be gi"en proper welfare facilities.

10. &ealthy competition : The business must use business ethics while dealing with the competitors. They must
ha"e healthy competition with the competitors. They must not do cut-throat competition. Similarly, they must gi"e e$ual opportunities to small-scale business. They must a"oid monopoly. This is because a monopoly is harmful to the consumers.

Zero Defects
The 7ero 8efect !e are tal+ing about is the 78 &oncept. It applies to setting a performance standard that cannot be misunderstood. 78 means to perform to the re9uirement you have agreed to and do it right every time.

 7ero defects isn1t about perfection. It1s about the understanding--on the part of every member of the organi:ation-- that processes must constantly be improved, and that fla!ed or defective systems must be re!or+ed and reorgani:ed from the top do!n. 7ero defects is an attitude and a performance standard, ;ith a :ero defects mind-set, each defect is rigorously traced to its root cause, and each cause is prevented. <anagement as+s, =*re !e completely eliminating this problem forever>1 and the organi:ation searches for !ays to say, =?es.1

Improve Relationship sing SRM

Spend analysis

Spend analysis is the process of collecting, categorizing and evaluating expenditure data, either by human hand or through software. Spend analysis is performed by companies to increase profitability through identifying wasteful spending and flagging contracts that can be renegotiated Spend analysis helps companies find new areas of savings that previously went untapped There are three core areas of spend analysis - visibility, analysis and process. y leveraging all three, companies can generate answers to the crucial !uestions affecting their spending, including: "hat am # really spending$ "ith whom am # spending it$ %m # getting what&s been promised for that spend$

Spend Analysis Process

'egardless of what Spend %nalysis tool an organi(ation uses, the process remains fairly consistent. Each step flows into the next, and then repeats with each refresh cycle that adds new spend data

).*ollect + The process of identifying data source systems, capturing their spend data and exporting to a file for distribution. ,.'elate + %ssociating data elements within a data set and across multiple data sets so that they correctly relate to one another. -. *leanse + .ormali(ing data elements such as supplier names, transactions and part information into one common name or part. This also includes standardi(ing spelling. *leansing means that all references to one particular company, such as /0 /ein(, are consistent, even though it may be spelled numerous ways 1/.0. /ein(, /ein(, /0/ein(, etc.2. 3. *lassify + 4rgani(e the spend data based on a common language, or classification structure. For example, custom sourcing categories or 5.S6S* codes.

7. 'eport 8 %naly(e + 9a:e the spend data available so that sta:eholders can analy(e it to ma:e business decisions.

Spend Analysis Applications:

4nce a Spend %nalysis system is in place, there are a number of studies that can be performed that improve visibility with regard to appropriate sourcing strategies. These include: Commodity-Specific Datasets *ommodity-specific datasets. uilding a separate data set focused on a specific commodity can add insight. #s the organi(ation being charged appropriately for what it is buying$ %re there variances from contract that can result in refunds$ Demand Reduction ;emand reduction. "hat is the spending across organi(ational units on a particular *ommodity$ "hy is one department spending more than another$ Contracts System ntegration *ontracts #ntegration. ;o contracts exist with our vendors$ #f not, why not$ %re these contracts useful in terms of spend reduction, or not useful$ !raud Detection Fraud detection. "hy is there spending in this *ommodity from this department$ "hy is spending out of line in this organi(ation$ "pportunity Assessment 4pportunity %ssessment. /ow many vendors are being used for a *ommodity$ Too many$ Too few$ #s the organi(ation buying from the right vendor1s2$ %t the right price$

#$ System cost reduction using spend analysis %o& spend management saves money

Decreasing !maveric"! spend -- @<averic+@ spend is the process !hereby re9uestors "those !ho are creating a re9uest for an item or service that !ill be turned into an order to a supplier$ buy items or services that are outside the preferred process or system. This often means that a @maveric+@ purchase typically results in an individual or department buying an item in an ad hoc fashion that results in paying a -6A premium for that item. Instead of buying from a preferred supplier !ith !hich the company has negotiated a contract !ith discount pricing, an individual goes outside the normal process and purchases that same item at retail. This is often hard to enforce unless some control mechanism "often technological$ is put in place thatB 1$ prohibits this type of purchasing -$ sets up penalties for these types of purchases .$ puts into place some type of approval or chec+ and balance system.

Increase of spend economies of scale -- By directing more spend to!ard a particular supplier, a company can negotiate more favorable pricing based on ho! much money it spends !ith that supplier in a given year. <any companies may purchase li+e items from many suppliers at

different prices. By consolidating this @spend@, and directing it to!ard one or a fe! suppliers, companies are able to get bigger discounts. The activity that a company goes through is called strategic sourcing "also called @supplier rationali:ation@$. This ta+es a commodity-by-commodity loo+, ta+ing into account business unit, location, and other re9uirements to find opportunities for economies of scale savings.

Increase process efficiencies-- *utomating sourcing, procurement and payment processes can greatly improve the efficiency of paper based and manual processes. Co!ever, different companies have had varying degrees of success in this area. The general idea is not to Dust automate, but also use the technology to improve upon these processes. #rocess savings can be measured in various !ays such asB ho! long it ta+es to process a purchase order, ho! many individuals need to touch the purchase order before it can be sent "@touch points@$, ho! long it ta+es to reconcile and pay the supplier, as !ell as many other methods to measure these process improvements. Increase procurement efficiency -- This involves using e-sourcing tools for the bidding and contract a!ard process "similar to eBay, in !hich you may have one buyer and many suppliers, or one supplier and many buyers$. These supply chain management tools also help to develop product re9uirements that can be sent to suppliers "typically called an @EF#@ or Ee9uest For #roposal$. * buyer "i.e. an individual at a company that has determined a need for a particular product$ !ill develop a document that lists the need "i.e. the type of product they need and !hy$, specifications, the bidding process "ho! the process !ill !or+ and ho! suppliers !ill be scored$, rules for the bidding process, and other factors. Buyers !ill then invite suppliers to register online, and open the event for a set period of time so that suppliers can bid. *t the end, the buyer a!ards the contract to one of several suppliers. The a!ard can be based on price, delivery time "the time it ta+es the supplier to fulfill an order$, or other factors such as 9uality or ho! closely the product meets the needs. The e-sourcing of direct items "ra! materials$ is often much more comple) than indirect "office supplies, etc.$, as the deciding factor is not Dust price but also the !ay the product fits into the overall manufacturing of a product. The !ay a company collaborates and transacts !ith their suppliers is a critical part of spend management as !ell. This is sometimes called @Supplier Eelationship <anagement@. This term is often incorrectly used in place of @Spend <anagement@.

Q. Supplier relationships are different from simple purchasing transactions in several ways
*ll successful companies build strong relationships !ith their suppliers. &ompanies are not isolated entities that simply purchase goods and services from individuals !ho happen to be able to supply them at that particular time. &ompanies typically ma+e larger purchases. In reality, successful companies recogni:e the need to build bridges bet!een their organi:ation and the vendors that they !or+ !ith by establishing strong buyer seller relationships. Supplier relationships are different from simple purchasing transactions in several ways. #irst$ there can be a sense of commitment to the supplier% For e)ample, if a vendor sells light bulbs, he can feel confident that the buyer !ill come to him the ne)t time, the company he represents re9uires a ne! shipment of light bulbs. &nother element of these supplier relationships is advanced planning% Buyers donGt Dust communicate !ith suppliers !hen a procurement need arisesH they also contact them in order to discuss their future needs and to determine ho! best to satisfy those needs by !or+ing together. ;hile both of those distinguishing features are easy to spot, a third element is also important. The company's attitude and vie( of its suppliers matters a lot for business success%

&ompanies that forge supplier relationships thin+ of these vendors as partners and not Dust simple commodity providers. This difference in orientation can have a profound affect on the !ay an organi:ation communicates and !or+s !ith its suppliers. This in turn affects efficiency and profitability. )ne ramification is a vendor*s "no(ledge of the buyer's business . ;hen vendors are vie!ed as commodity providers, they generally donGt ta+e the time or are not given the opportunity to learn the details of the business or its vision for the future. Co!ever, vendors that are deemed to be partners are encouraged to become +no!ledgeable about the company, its processes, its products, and its goals.